Third stimulus checks, tax refunds: Why this behavioral research expert says planning ahead can help you save more of these windfalls

Third stimulus checks, tax refunds: Why this behavioral research expert says planning ahead can help you save more of these windfalls

With tax season upon us and a third Covid relief bill in the works, over 150 million Americans are expecting to receive windfalls of cash in the coming months.

While counting on a larger chunk of money is both exciting and useful, it can also disappear quickly if you don't carefully plan ahead what to do with it. Known as "precommiting" to some behavioral researchers, mapping out a purpose for such windfalls helps you use the money in meaningful ways “” and avoid losing track of where it goes.

When you commit ahead of time to saving a portion of this "free money" now (versus when it actually hits your bank account) you're likely to save at least few hundred dollars more than you would otherwise, says Perry Wright, a senior behavioral researcher at Duke University's Common Cents Lab.

These savings can help you build an emergency fund, or pay off high-interest debt if you've already got your basics covered. As the project lead for BlackRock's Emergency Savings Initiative, Wright's research has shown time and time again how windfalls from tax returns (and, now, the stimulus) have the potential to make a big difference.

Below, he explains the importance of identifying and strategizing your savings